States and Localities Reap the Benefits of Shared Services

We ask customers what they think of government-to-government shared services.

Steve Henderson, CIO of Lincoln, Neb., and Lancaster County, says a shared services agreement with the state saves money. Ervin Photo

Over the past few years, Public CIO has written frequently about government agencies that have launched shared services offerings. But one thing these pioneering providers have in common is a need for customers — courageous partners from other jurisdictions who are willing to move a significant part of their IT operations into another organization’s data center.

We asked a handful of these IT executives why they decided to take the plunge, the lessons they have learned as shared services customers and whether they would do it all over again. Here is what they told us.

As IT director of Sarasota County Schools, Joe Binswanger has a close relationship with Glenn Zimmerman, CIO of Sarasota County Government. The county has provided the school district with data center services for the past eight years. Nevertheless, Binswanger regularly evaluates county services to see if he might want to bring them back in-house or provision them some other way.

For instance, the district recently became eligible for the federal e-rate discount for its Internet service. Through an RFP, the district found a telecom provider that could offer more bandwidth at a lower cost. “The county was doing a fine job, but they couldn’t compete on price with this e-rate provider,” Binswanger said.

In such a situation, strong communication between the organizations is key to their ongoing working relationship. “Even before we thought about doing that RFP, I got together with Glenn to tell him what we were thinking about,” Binswanger said.

“And even though we were moving away from their service, the county’s network staff and designers helped us with the transition,” Binswanger said. “We could tap their expertise.”

Likewise, the district regularly reviews the cost of data center storage services it gets from the county. “Two years ago we asked our finance department to do an independent analysis comparing our costs with the county versus outside providers,” said Binswanger. “They told us there were significant savings in going with the county versus an outside vendor. And there is no way we could ever recoup the cost of building and managing our own data center.

“But we refresh that analysis on an annual basis,” he added. “Our school board understands the concept of shared services, because we have spent the time educating them over the eight years of this arrangement.”

The need for better communications also extended to Binswanger’s own employees. “When we first tried shared services, there were people on the school board side who were nervous and thought the county was going to take everything over,” he said. “But I put in place a communication plan to explain that we are leaning on a government entity for this niche that they do well and can show value added. For instance, they do an exceptional job on security. I don’t lose a wink of sleep about information security with them handling our data.”

Get It in Writing

Daryl Delabbio has been county administrator/controller of Kent County, Mich., since 1998. In 2013, he co-authored a white paper titled A County Manager’s Guide to Shared Services in Local Government, which identifies three key preconditions of a successful shared service delivery venture: strong leadership, trust and reciprocity; clear goals; and measurable results. Among the first steps the authors recommend are creating a shared services assessment team, identifying strengths in participating governments, and starting with small pilot projects.

”One big thing I’ve learned from 36 years in local government is get it in writing, whether you’re a customer or provider in these shared services settings,” Delabbio said.

He gave an example of a troubled property tax administration software project 10 years ago involving 34 local governments. ”A $5.5 million project went south when the developer couldn’t deliver what it had promised,” he said. The smaller entities in the deal eventually pulled out, and his county was left holding the bag. ”Never enter into intergovernmental cooperative deals without a written agreement, no matter how close the relationships or how well researched the solution,” Delabbio said. ”We did months of study and held forums with all the units of government, did needs assessments and gap analyses. It took $250,000 just to do those steps.” But in the end, it wasn’t enough.

The county is considering participating in a planned shared ERP system with the state and the city of Grand Rapids. Kent County uses PeopleSoft software now but plans to migrate off of it by 2016. The goal is to create a system that could be used by any Michigan government unit. ”We have a decision to make about whether we are in or not,” Delabbio said.

But Binswanger stressed that there are aspects of his department’s responsibilities that he wouldn’t consider outsourcing. “Anything instructional-related must stay in-house,” he said. “We have challenges related to our students taking state achievement tests by computer. We would never ask the county to help with that because it is not their area of expertise.”

To deal with initial resistance to shared services, develop a clear statement of how tasks will be divided between the host and customer organizations, Zimmerman said. “Have a strong agreement of roles and expectations in place and a common plan of why you are going to benefit from it, and then revisit and tweak that agreement as often as needed.”

Binswanger often tells Zimmerman that he needs to get more for his dollar from the county than he would be from a commercial vendor. “And I do feel that way,” he says.

A Second Chance Pays Off

Shared Services Provider: California

Customer: Rohnert Park, Calif.

In 2012, David Rowley saw a demonstration of shared IT services available from California’s Office of Technology Services (OTech) at a meeting of local government IT professionals. He was intrigued by the possibilities — and for privacy and security reasons he was hesitant about moving government data to a commercial cloud solution.

“OTech has an earthquake-proof facility, and I am interested in having it eventually host my data for disaster assurance,” said Rowley, IT operations manager for the Northern California city of Rohnert Park. But there was one problem: The state had a poor reputation with local government IT folks. “People who worked with them in the past had nothing good to say about it,” Rowley said. “Their old model didn’t work. It was too bureaucratic.”

Rowley said he told the OTech team that it had some baggage to overcome. But in the end, he decided to give the state a try. Last year, Rowley made OTech, which is in the process of changing its name to Data Center Services, the city’s Internet service provider. “So far the relationship has been great,” Rowley said.

He likes the fact that OTech is a big player. “If they call [a vendor], they get a response, which is something I have had trouble with,” he said. “Plus, they are at a whole different level of security and filtering, and we get the payoff from that. I sleep well at night because of what they are doing.”

By the end of 2013, Rowley hopes to be working with OTech on data storage.

Leveraging Trusted Relationships

Shared Services Provider: Nebraska

Customer: City of Lincoln and Lancaster County, Neb.

Just over a year ago, Steve Henderson, CIO of Lincoln, Neb., and Lancaster County, had a problem. One of the largest departmental users of his mainframe services chose to stop using that service, forcing him to consider raising prices for other internal customers to make up the fixed cost of running the mainframe. “There was a hue and cry over that,” he said. Henderson, who previously worked in the state IT department and knew it well, remembered that Nebraska offered services to smaller jurisdictions.

“I realized I could be a customer for the state’s mainframe computing,” he said. Although the state was providing some shared services to locals, mainframe computing wasn’t one of them. Discussions between Henderson and the state IT office resulted in a mainframe shared services deal that saves money for the city and county.

“I’d been with the city and county for only three years after being at the state for 30, so I knew lots of people there and had a high level of comfort,” he said.

Henderson said the arrangement is working so well that he’ll likely auction his old mainframe system. He’s also started using an enterprise content management shared service from the state.

“All kinds of vertical silos build up in government organizations, and it can be difficult to reach across them,” he said. “Having worked in state government and knowing the people and processes made a huge difference in terms of comfort level.”

Easing the Staff Burden

Shared Services Provider: University of Cincinnati

Customer: Owens Community College

Owens Community College in Ohio had hosted its Blackboard learning management system in-house since 2004. But with online courses growing 30 percent each year, that task was beginning to overwhelm the school’s internal resources.

In May 2010, Owens turned to the much larger University of Cincinnati (UC), which hosts the Blackboard system for smaller institutions. Owens selected UC as its service provider after discovering the university could provide a hosted Blackboard system for substantially less money than buying the service directly from the software vendor.

The university also could allocate more staff to back-end operations than Owens could, and it agreed to conduct three Blackboard training sessions per year on the Owens campus. In addition, the outsourced environment lets Owens’ Blackboard administrator give his undivided attention to customizing scripts and improving other aspects of the operation.

“We have remained pleased with the hosting arrangement and the services that [the university] offers,” said Mark Karamol, division director for e-learning at Owens. “They have lived up to the promises made in the memorandum of understanding.” The 10 colleges and universities in the shared service arrangement with UC have a conference call every month to discuss issues.

Karamol said his business office looks over every contract and memorandum of understanding with a fine-toothed comb for potential problems with dates or service language. “They always find something I didn’t see,” he said. “But I think that because we are working with another college, they are not out to put one over on us. It is quite different from our relationships with a vendor.”